Legal Eagle Column: What happens to your pension in a divorce?

Iain MacAskill, Family Law Solicitor at Neves Solicitors, explains

Since the Welfare Reform & Pension Act 1999 the Courts have had the power to share pensions between a couple in divorce or dissolution settlements.

Despite this, according to new research by Scottish Widows, 7 in 10 couples do not consider pensions during divorce proceedings.

In fact the research suggests that during divorce or dissolution proceedings, people are more concerned that the settlement will result in them losing a pet (13%) than sharing a pension (9%).

This is despite the average married couple’s retirement pot totalling £132,000. These statistics are extremely concerning and suggest that despite the introduction of pension sharing nearly 20 years ago, it is not being considered in matrimonial settlements.

This is likely the result of a lack of understanding of how a pension can be split in divorce or dissolution proceedings, which include a Pension Sharing Order or a Pension Attachment Order.

The most common way a pension is shared in a settlement is a Pension Sharing Order. This splits the pension assets immediately providing each partner with their own share of the pension pot.

This can provide for a clean break between them so that each partner has the freedom to do what they want with their share independent of the other. Whilst some pensions are relatively straight forward, there are others which carry additional benefits and can be extremely complicated.

Salary based schemes are particularly valuable as the benefits to be received on retirement are calculated by reference to years of service with an employer and salary earned.

In contrast, money purchase schemes, whether occupational or under personal schemes, where pension contributions are invested, are dependent upon other factors, not least the success of the investment policies employed.

Some schemes, for example Police schemes, may provide for retirement at an age substantially lower than under either State schemes or most other occupational type schemes.

Additionally, some policies may provide for lump sums payable on death in service. It is, moreover, now possible to drawdown a tax free lump sum not exceeding 25% of a pension fund when you are aged 55 or over.

It is therefore very important that expert legal and financial advice is taken at an early stage in the separation so that a valuable asset is not simply ignored due to a lack of understanding.

If you are facing a relationship breakdown and need some advice, talk to us on 01908 304560.

This feature was published in the April 2019 issue of Celebrate:MK lifestyle magazine. Read the full magazine above or by clicking on this link.

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